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Profit and Loss Statement and Cash Flow Statement for Grow Management Consultants

Part A- Analysis

Analysis of Financial Information

The analysis of financial statements helps in depicting the position of the company as per the income that is generated and also the expenses which are made. This information helps the company in taking decisions and also it is used by the stakeholders who are interested in knowing the overall health of the company (Ganga, Kalaiselvan & Suriya, 2015).

Profit and Loss Analysis

Profit and loss statement for the company Learner Management Consultancy shows the good health of the company. The company is generating profit through its sales. The gross profit margin shows the amount of money that is left from the sales after the cost of the goods sold has been reduced. The company's statement shows that the Gross Profit margin is 100% as there is no cost of goods sold for the organization.

Net profit margin refers to the percentage that is left after all the operating expenses have been reduced from the total revenue of the company. The company's net profit margin stands at 49.78%. This shows a very good position for the company. It implies that only 51% of the sales are being used for the expenses. Remaining 51% is the profit for the company. Usually. Companies can take around 19 to 20% of net profit. The net profit margin shows that the company is generating higher returns and is very profitable. The earning can help them in investing further and grow their business.

Cash Flow Analysis

Learner Management Consultancy Pvt. Ltd has certain sources of income. Income is the source from which the company is generating money to run its business and earn some profits. The various sources of income for the company in the year 2018-19 are Consulting fees that it might have received. With that, there is an inflow of cash from the conference that the company has conducted and plans to conduct next year too. E-books that were sold brought in income for the company and the search for executives. These were the main components of the income for the company. All the revenue that has been generated comes from these sources for the company.

The company has expected or budgeted the income that it might earn before the start of the year but the result varied and actual results show certain changes. This variance can be because of various factors that might have impacted the income. Except for the conference income, all other income is either higher than the budgeted or are at par with the budget. The following table shows the analysis of variance concerning budgeted and actual sales or income of the company.

 

Total

Total

 

 

Budget

Actual

Variance

INCOME

     

Consulting fees

1,210,000

1,410,720

16.59%

Conference

63,000

57,000

-9.52%

E-book

10,000

15,000

50.00%

Executive search

144,000

144,000

0.00%

NET INCOME

1,427,000

1,626,720

14.00%

The consulting fees that were made was16.59% higher than the budgeted and also the sales of e-book were doubled. This shows that the company has predicted lesser sales than it made. Conservatism principle can be one reason for that. As per the principal company predicts things by keeping a realistic approach and the lesser amounts are taken. So, if the company even gets the budgeted concerning principle, it might have reached the break-even point. But, as per the results, the company had made 14% more than it was expecting. This shows the good performance of the company and the efficiency of functioning for the company.

The budgeted expenses also showed the variance. Most of the costs were high. This can be seen from the table below.

EXPENSES

Budgeted

Actual

Variance

Salaries/wages

504,000

529,200

5.00%

Superannuation

63,000

63,000

0.00%

Cleaning

10,080

10,080

0.00%

Accounting fees

6,300

7,165

13.73%

Advertising and marketing

525

5,250

900.00%

Contract writer (e-book)

11,550

48,090

316.36%

Computer software

4,200

4,830

15.00%

Motor vehicle expenses

4,200

5,444

29.62%

Utilities

4,200

4,131

-1.64%

Insurance

4,200

4,028

-4.10%

Office supplies

1,575

2,207

40.13%

Lease/loan payments

1,365

1,575

15.38%

Rent

45,108

45,108

0.00%

Sundries

2,100

2,384

13.52%

Travel and Accommodation

5,250

5,654

7.70%

Conference venue and catering

5,000

10,000

100.00%

Speaker fees and travel

10,000

11,000

10.00%

Marketing (conference only)

5,000

7,500

50.00%

Conference bags

1,000

1,200

20.00%

Conference casual project officer

30,000

30,000

0.00%

E-book

10,000

10,000

0.00%

Desktop publishing

3,000

3,000

0.00%

Marketing (e-book)

1,200

1,200

0.00%

Repairs & maintenance

1,575

1,260

-20.00%

Telephone

3,150

3,569

13.30%

TOTAL EXPENSES

737,578

816,875

10.75%

SURPLUS/ DEFICIT

689,422

809,845

17.47%

The maximum cost that was increased was of Advertising and marketing. There was a 900% increase with respect to the budgeted cost and the next highest change of cost was with the contract writer for ebook. The expense increased by 316.36% and the cost of conference and catering increase by 100%. The advertising expenses were too high. The company can take certain steps and reduce it.  Writer expenses should be reduced too. The company can get into contracts with the writer for a longer duration of time. This will help them adjust the cost.  So, the basic cost that should be reduced will be advertising. Companies should move to social media platforms that are cheaper and also give a platform to promote their brand. Thus, helping the company to save more.

The venue booked for the conference showed a 100% increase. The venue selected should have the cost that is in the budget. The company spent double on what it planned to do for the conference. With that for the marketing expense of the conference, there was a 50% hike concerning the budgeted. The company needs to manage these costs to bring more profits from the conference. Marketing and venue costs should be revised for utilizing the maximum benefits.

Conference 2020

For the year 2020, the company expects a rise of 10% in all the costs and expects that 150 people will be attending the conference. So, for the following purpose

Conference 2020

 

 

Elements of costs

Cost for 2019

Costs for 2020

 

(in $)

(in $)

Conference venue and catering

10,000

11,000

Speaker fees and travel

11,000

12,100

Marketing (conference only)

7500

8,250

Conference bags

1200

1,320

Conference casual project officer

30000

33,000

 

59,700

65,670

For 20% profit

 

78804

Charges on 1 Person

 

525.36

Every person who is attending the conference should pay around $526. This will help the company in earning 20% profit from the conference.

Part-B

Debtor Management

The debtor management system is a central system that manages the cash flow of the company (Kaur, Laveena & Jindal, 2017). If Debtors are not managed appropriately the finances of the company are left vulnerable.

According to the Aged debtor analysis of the company, the payments for the services are not received at the moment. The minimum credit cycle for the debtor of the company is 60 days. The company has no credit facility. This will create a mismatch between the inflow and outflow of cash. There should be a certain amount that the company receives at the time of sale. The first payment from the debtors that the company receives is after 60 days for a sum of $3781 which is minimum concerning 90 days and 120 days cycle. The maximum number of debtor payment was received by the company after 120 days. This in the future can create a problem as this is a long time and certain payments can turn into bad debts or some may not pay at all. Companies should try to reduce the cycle of payment for the business as it helps them in keeping the inflow of money at a regular pace.

Recommendations for Debtor Management Research

The company should adopt the following 3 practices for better management of debtors at their end:

  • The cycle for the debtor payment should be reduced. Also, there should be part of the payment that is to be made upfront. This will bring money to the company in the current situation. It will help in the easy running of the business.
  • The company should make a list and keep reminding the debtors for the payment so that the money is not converted into bad debts. A receipt should be sent to the debtor with the date of payment.
  • Late payment charges should be clearly described to the debtor beforehand. When the debtor is given the cycle for payment, at that point company should explain all the clauses and also the charges that will be added if the payment is not made on the date.

Thus, in this manner company can have better management of its debtor. Reduced time will help in more inflow of cash that can be used by the company for various activities.

References for Review Project and Debtor Management

Ganga, M., Kalaiselvan, P. K., & Suriya, R. (2015). Evaluation of financial performance. International Journal of Scientific and Research Publications, 5(4).

Kaur, B., Laveena, & Jindal, S. (2017). A study of debtor management of an Indian company. Imperial Journal of Interdisciplinary Research (IJIR), 3(4).

Remember, at the centre of any academic work, lies clarity and evidence. Should you need further assistance, do look up to our Business Plan Assignment Help

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